Air Canada getting some lift

Sep 27th, 2010 – 1 Comment

Having said that there is support at $2.50 and transportation stocks tend to enjoy a period of seasonal strength from September to November.


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Hi Lou

Could you review Air Canada  (AC.B TSX) . What is your price target in the next 6 months?

Wayne

Hi Wayne,

Thanks for the assignment. I have to admit that I have never been a big fan of the airline sector. There is too much capacity. Every country in the world is operating a money losing airline and they are all using low prices to cut each other’s throats. Great for consumers tough on investors. Air Canada (AC.B TSX) has about $1 billion in debt coming due by 2012 and intends to pay off the debt by holding back on buying aircraft . The other part of the go forward plan for Air Canada is to expand international routes.

The charts seem to be signalling that despite my personal misgivings there could be opportunities with this stock.

The three year chart illustrates the steady rise in the stock since October of 2009 as the global recovery gave consumers the confidence to travel for business and pleasure.

The shares of AC.B bounced but from a very low base. It has added $1.80 a share in that time which is always a sweet outcome for investors. At this point the stock isn’t facing much in the way of resistance all the way to $4.00.

The six month chart tells the story of a stock that is currently overbought according to the RSI and may have to pull back. Having said that there is support at $2.50 and transportation stocks tend to enjoy a period of seasonal strength from September to November.

I would say that AC.B, although a long time money shredder, could provide an opportunity to catch a ride for the next ten weeks. After that all bets are off.

Have a nice flight and Happy Capitalism!

Categories: Aerospace
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